Some companies are obviously great investments -- in hindsight. Yet for every stock out there screaming "buy me," others simply give us a nudge and a nod. How can we tell tomorrow's obviously great investments from the thousands of pretenders?
The stars' walk of fame
The data shows that stocks achieving five-star ratings on Motley Fool CAPS have outperformed the market by 12 percentage points, and newly minted five-star stocks represent your best opportunity to capture those returns. So let's sift through the proprietary ratings system and find those stocks heading toward superstardom. Here are a handful of four-star firms approaching greatness.
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AgFeed Industries
(NASDAQ:FEED) -
ExxonMobil
(NYSE:XOM) -
NutriSystem
(NASDAQ:NTRI) -
Take-Two Interactive
(NASDAQ:TTWO) -
Wal-Mart Stores
(NYSE:WMT)
Some of these names might surprise you. ExxonMobil, for example, has been putting a tiger in your tank for decades, and the company has been a headline-grabber with its outsized profits in these days of sustained high oil prices. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 115,000-plus CAPS investors chose these companies as less obvious sources for tomorrow's great buys, so let's see why they might merit your attention.
In the sight of greatness
It seems as though there's no middle ground when it comes to Wal-Mart: You either love it or hate it. However, as the economy has imploded, and stretching your fistful of dollars has become imperative as well as commonplace, it seems many of the discount retailer's critics have been mollified. Wal-Mart's “everyday low price” policies have turned it into a Mecca for shoppers looking to stretch their money. Maybe even some of its harshest critics have found themselves forced to shop there.
While membership clubs like Costco
CAPS All-Star TMFBreakerJava points out that when the going gets tough, the tough (and not so tough) go to Wal-Mart:
When times get tough, people look for bargains. They will find them at Walmart. This is a bedrock business for the coming year. Hop aboard for superior returns.
Similarly, it was earlier this year that CAPS member punk71 pointed out the relationship between a weak economy and a strong Wal-Mart:
Let's face it, the economy can tank, gas prices can soar, and Wal-mart will continue to make money. Wal-mart is the first place that the people making cutbacks will spend their money.
Yet that view is not universally held. Another top-rated CAPS All-Star, mpapile, thinks that Wal-Mart is not completely immune from the effect the economy has on everyone, and that reining in spending is a more common effect of tough economic times:
Contrarian pick. Seems everyone thinks people will go to walmart in weak economy. Well I think that everyone that will go to walmart is already going there. In a weak economy people simply spend less. And walmart is not immune to those systemic effects and with a P/E where it is now, it is ripe to go down in any downturn.
On to AgFeed Industries. Although investors aren't going in whole hog for this feed manufacturer and pig producer, it is notable that more than 96% of CAPS investors who have rated it think it will outperform the market. As a fast-growing hog farmer, CAPS member Umbo66 sees AgFeed as benefiting from a protectionist culture that's growing in China:
Largest and fastest growing hog farmer in China. China is also turning more protectionist on things it can produce. China economy will pull together in the next year or two then this will be a powerhouse as this is the favorite meat of China.
A great opportunity for you
These four-star investments are on their way to five-star greatness, and it pays to start your own research on them on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
Sign up today for the completely free service, and let us hear what you have to say about the great -- and almost great -- companies that interest you.
On Oct. 7, 2008, Fool co-founder David Gardner and his Motley Fool Pro team invested $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
